I often receive queries from private individuals about VAT, customs duty and personal imports. The information is available on HMRC’s websites, but like everything tax related, you have to know where to look and even if you find the right information, it’s still written in “tax-speak” and isn’t the easiest to understand.
So I thought it might help to explain some of the most important issues with links to the relevant pages on HMRC’s website.
Goods imported from EC countries
If you buy goods from other EC countries, then you won’t have to pay any customs duty because the goods are in “free circulation” in all EC countries. However you will be charged VAT on goods purchased for non-business purposes by the vendor. So if the goods are bought from a Spanish vendor, you’ll be charged Spanish VAT. In some cases, vendors in other EC countries are registered for UK VAT, so will charge UK VAT instead of say Spanish or French VAT.
UK VAT is also charged at import on goods bought by mail order which are delivered from the Channel islands.
Goods imported from non-EC countries
Goods imported by travellers
Most of us are familiar with the the duty/VAT limits for goods that we bring back from non-EC countries, whether it’s a holiday or a business trip. The rules, with the current limits are in HMRC’s leaflet “Travelling to the UK”.
Goods imported by post or courier
If you’re importing goods by post or courier, including purchases made on the internet, HMRC’s guidance is on their website “Tax when ordering or sending goods from abroad”.
If you’re importing certain goods, such as alcohol and tobacco, perfume or toilet water, then you have to pay duty and VAT on the full value. But otherwise, duty and VAT is payable on most goods as follows:
- You pay duty on goods with a value over £135
- You pay import VAT on goods with a value over £15
The rate of duty and VAT is based on the rates applicable at the time in the UK to the value for customs and VAT respectively:
- The value for duty is the cost of the goods + freight + insurance.
- The value for VAT is the value for duty plus the duty.
Here’s an example of how it works if the duty rate is 6% and the VAT rate is 20%:
- I imported goods from the US which cost £140, plus freight and insurance of £40. So the value for duty was £180. Duty at 6% = £10.80.
- The value for VAT is the value for duty i.e. £180 + duty £10.80 = £190.80. VAT at 20% = £38.16.
- Total duty and VAT payable = £10.80 + £38.16 = £48.96.
HMRC’s guidance explains that you may also have to pay a handling charge from Royal Mail in addition to the duty and VAT.
Claiming refunds of duty and VAT
I’m often asked about how to reclaim VAT and/or duty if, for example, the goods have to be returned.
The information is on HMRC’s website page: “Goods posted from outside the EU: tax payments, queries or refunds”.
If you believe that you have been overcharged duty or VAT, for example because the description of the goods on the import declaration was incorrect, you can claim the overcharged VAT from HMRC using form C285.
If you return goods to the vendor, you must write to the UK Border Agency, which handles queries about duty and VAT on imported goods.
IN EITHER CASE, YOU MUST PROVIDE ORIGINAL DOCUMENTATION SUCH AS THE IMPORT DECLARATION ATTACHED TO THE PARCEL AND THE SALES INVOICE. So make sure that you retain all such documentation in the event that you need to make a claim.
Finally, if you still need further information about anything to do with import VAT or duty, you can call HMRC’s Customs Helpline on 0800 200 3700.
Dealing with overseas suppliers
If you buy goods from a non-EC supplier, e.g. a Chinese or US vendor, which says that the cost is “all – inclusive” or “no hidden charges”, bear in mind that any price “guarantee” probably doesn’t extend to customs duty or VAT. The terms and conditions will be subject to the laws of China, the US or wherever the vendor is based and some countries don’t even have a VAT system of sales tax. So there’s no guarantee against import duty or VAT, or any other UK costs. If you buy goods from non-EC vendors, assume that you WILL have to pay duty and VAT in addition to the “all-inclusive” price shown on the vendor’s website.
I often hear people complain about prices charged by UK retailers, saying “how can they charge that much when I could buy it direct for half the price?”. Well now you’ll understand that one reason is that the UK retailers’ price includes duty and UK VAT, as well as freight and insurance and other costs of actually getting the goods to the UK. And however much you trust a non-UK vendor, your chances of getting your money back or claiming compensation are always going to be risky, simply because the vendor isn’t subject to UK laws. If you’re buying from overseas, you’ve got to take all of these issues into account when comparing the purchase cost to those of UK retailers.
Courier charges
One final issue concerns charges made by commercial couriers – other than Royal Mail/ParcelForce – for handling customs/VAT issues on importation. I understand that certain commercial shippers charge the importer a fee, which is added to the duty and VAT cost on delivery. I’m no expert on UK contract law, but it’s my understanding that unless the importer (i.e. you!) have contracted with the shipper to pay such a charge, then legally you don’t have to pay it. Check out this very useful blog post by an old friend of mine who successfully challenged FedEx about the issue.
If you need any further information about this issue, please put your query on the forum or email me directly.
Marie
June 2014